There has been a profusion of layoffs recently, both within startups and in mid-sized and big companies like Google, Microsoft, and Amazon. There have been financial hardships among employees as a result of such downsizing.
The shock of being laid off can cause us to take a moment and examine the lessons, one can learn from these mass layoffs, whether or not we have been laid off. As mass layoffs have a significant impact on your financial stability and can threaten your future, being financially fit is important in such situations. Finding jobs
What is financial fitness?
Did you know that a survey has revealed that 69% of the households in India struggle with financial insecurity and vulnerability?
When you have financial goals like buying your first house, clearing out debt that has accumulated or simply starting to save for an emergency fund, managing your finances can seem daunting.
And that’s just the first step. Financial fitness is not just about striking off one financial goal that you’ve set — it’s a lifetime discipline of achieving your current and subsequent financial goals that you want to meet.
Our financial situation can have a profound impact on our quality of life since money is such an important part of life.
Why is financial fitness important?
The one thing that layoffs have taught us is to be prepared financially for what may come. However, COVID too had spiked this need. Many people understood the assignment and moved towards the journey of becoming financially fit by first creating a financial cushion.
Financial fitness can impact someone on both a short-term and long-term basis. Individuals with low levels of financial wellness may not be financially prepared for retirement in the long run. This can force someone to work longer than they intended.
The issue over the short term is that poor financial wellness can create excessive stress that is not benign. Chronic physical illnesses such as high blood pressure, hardening of the arteries, obesity, and diabetes have been linked to excess stress. Financial stress has been linked to poor physical and mental health in several studies.
There is no doubt that money plays a major role in people’s lives as a source of stress. However, it cannot be said that it’s the only factor, but it’s surely a contributing factor!
5 simple habits of financial fitness:
Financial fitness is achieved when people can apply financial knowledge confidently to manage their economic lives effectively. That includes making good financial decisions, spending within one’s means, planning adequately for emergencies, and preparing for the future.
Physical wellness is important, but financial health habits are also crucial to living your best life. Let’s help you build some good habits to make you financially fit.
Now you know that creating a budget, following the budget and saving are the key to being financially fit, here we’ll be focusing on a few things that you need to bring into your daily life.
1. Procrastination: Your biggest FOE
The only thing that is costing you an immense amount of money is PROCRASTINATION.
The danger of procrastination is that it prevents you from doing the things that you know you need to do at the right time.
The cost of procrastination can dent your financial future by significantly reducing your corpus for long-term goals.
There are three common reasons why we put off managing our money:
- Lack of confidence
You are more likely to procrastinate if you lack confidence in your ability to complete a task. The process of getting started with investments, for example, can seem complicated and challenging. As a result, you may hesitate to start because you lack confidence that you will be able to finish the task successfully.
- Lack of enjoyability
It is common for us to procrastinate when a task is not particularly enjoyable. People usually procrastinate and get distracted by other tasks rather than dealing with their financial responsibilities when it comes to budgeting spreadsheets and investment research.
- Time delay
Behaviorly it has been stated that we tend to procrastinate more when we have a long list of tasks to complete. There is little pressure to get started if the deadline is in five years, but if it’s in three days, you’ll feel the need to get started. We tend to put off starting to achieve our long-term financial goals because they don’t have the same sense of urgency as the credit card bill due tomorrow. One needs to work on both aspects to move ahead of this.
2. Lack of Knowledge
Have you ever heard of this quote, “Supposing is good but finding out it is better”– Mark Twain.
Before indulging yourself in any financial product or service it is crucial that you spend some time researching. One mistake can hamper your financial situation. Gaining financial literacy can help you in eliminating the risk of any unwanted financial situations in the near future. Without having clarity & vision of your future, the difficulty level to manage your money purposely will increase.
Many options are available to you, from reading books and articles to getting a financial advisor to provide you with the best research knowledge.
Avoid losses and scams by researching before investing and keeping track of changes in rules and regulations.
3. Bid goodbyes to DEBT
Another habit you should adopt is to avoid bad debts and loans. In the name of instant gratification, you can erode your financial worth by taking out personal loans and making credit card payments. These loans can deplete your savings, so be careful. The debt trap is the most difficult to get out of. People end up taking loans-on-loans to repay, thus falling into the debt trap.
4. Don’t confuse savings with investing
In other words, saving is preserving. The purchasing power of money in a savings account is eroded by inflation if it’s kept for too long. It is called inflation risk.
If you don’t need your cash in the short term, it may be better to invest it to achieve more growth. In the long run, an appropriate investment strategy like investing in mutual funds via SIP will grow far more than your savings would.
Compounding is the process of earning interest on interest over time. It’s like a snowball effect, your money keeps growing. Over a long period of time, compounding growth works its magic. Start investing as soon as possible so that compounding will work in your favor for a longer period of time.
5. Diversify & risk-proof your investments
A diversified investment approach (equity, debt, and hybrid) is one of the best ways to combat risk. Diversifying one’s assets is essential since when one class of assets underperforms, another might knock on your door with big returns.
A sound financial plan is as much about wealth creation as it is about protecting one’s assets. Life can be unpredictable, so ensure you have a plan for the unforeseeable.
Adequate insurance and an emergency buffer are the key components by way of which you can avoid risks. Securing insurance helps ensure that you, your loved ones, or your dependents and investments are protected.
Also Read: 5 Tips for Financial Planning at Age of 30